Search Bob Brinker Fan Club Blogs

Thursday, March 18, 2010

TIPS vs GNMA Performance Update with 2.1% CPI-U Inflation Rate

Bob Brinker continues to recommend Vanguard's GNMA Fund, VFIIX, on his radio show. Over the course of last year, I sold out of my "explore portfolio" position in Vanguard's GNMA fund and replaced it with individual TIPS.

Today's CPI Press Release says Year-over-year CPI rose at a 2.1% rate
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 2.1 percent before seasonal adjustment.

Not seasonally adjusted CPI measures
: The Consumer Price Index for All Urban Consumers (CPI-U) increased 2.1 percent over the last 12 months to an index level of 216.741 (1982-84=100). For the month, the index was unchanged prior to seasonal adjustment.
My 5-yr TIPS with a 1.25% base rate will earn 3.35% at this rate of inflation
My 20-yr TIPS with a 1.375% base rate will earn 3.475% at this rate of inflation

In my other newsletter, The Retirement Advisor, we recommended Vanguard's TIPS fund, VIPSX, over Vanguard's GNMA fund last year.

Vanguard's GNMA fund, VFIIX currently at $10.82, currently yields 3.16% and will lose NAV (net asset value) if inflation spikes in the future. It will gain NAV if we see deflation and rates drop.

ECRI says we have begun a cyclical upturn in inflation. That doesn't mean we will get hyper (over 10%) inflation, but it means deflation is off the table.
Owning Vanguard's TIPS fund over its GNMA fund paid off last year:
  • in 2009 Vanguard's TIPS fund, VIPSX, gained 10.8%
  • in 2009 Vanguard's GNMA fund, VFIIX, gained 5.3%
More information:

No comments:

Post a Comment

FREE Updates Mailing List


We email regular "FREE Bob Brinker Fan Club Updates" to everyone on our "Bob Brinker Fan Club" distribution list. If you would like to get on this list, then click this link.


Top Rated Newsletter


Timer Digest Features
Kirk Lindstrom's Investment Letter
on its Cover

Cick to read the full page article!






US Treasury Rates at a Glance - iBond Rates - LIBOR Rates

Must Read:
Beware of Annuities - Payday Loans Warning